Wall Street's AI money has moved past chips alone. The new trade is the optical hardware that lets AI data centers move fast enough to make those chips worth buying.
Lumentum, Ciena and Corning are getting a kind of attention that used to belong almost entirely to Nvidia and the memory-chip makers. Lumentum's stock has surged more than 140% in 2026, according to Investopedia. Corning is still up sharply for the year too, even after a brutal July pullback. Ciena's story is different: it's less about a meme-like chart and more about sales. The company reported fiscal second-quarter revenue of $1.57 billion in June, up 40% from a year earlier.
This is not a glamorous part of the AI trade. That's exactly the point. If you're buying the AI buildout now, you're not only betting on GPUs. You're betting on the cables, lasers, transceivers and optical systems that let thousands of chips talk to one another without wasting half the power budget on moving data around.
Copper has carried server connections for decades, but AI clusters are pushing it into a corner. That's the bottleneck. The Register reported in April that Nvidia's move toward optical scale-up was already visible in its Vera Rubin and Feynman roadmaps, after the company showed multi-rack systems that use photonics to expand compute domains far beyond a single rack. Jensen Huang was blunt at GTC: Nvidia needs more capacity for copper, optics and co-packaged optics. That is the sentence investors heard.
The engineering problem is simple. Copper works well over short runs. Stretch the distance, raise the speed, and the signal gets uglier. Heat follows. In a normal office network, that sounds like a nuisance. In a 10,000-GPU AI cluster, it becomes a bill measured in power, cooling and wasted compute. Light solves part of that problem because optical links can move more data over longer distances with less loss.
That's why this trade has legs.
The Numbers Are Big Enough To Move Stocks #
Goldman Sachs put a hard number on the opportunity in its May 2026 research note on optical networking. The firm expects the AI optical networking market to grow roughly ninefold to $154 billion by 2028. KraneShares, citing the same Goldman work, said co-packaged optics could account for $91 billion of that market. Those are not small accessory markets hanging off the side of AI. They are becoming part of the core machine.
Lumentum's own results show why investors are paying up. The company reported fiscal second-quarter revenue of $665.5 million on February 3, up 65.5% year over year, and said its optical circuit switch backlog had moved beyond $400 million. It also pointed to a multi-hundred-million-dollar co-packaged optics order for delivery in the first half of calendar 2027. That is not a vague AI story. It's a purchase order story.
Ciena has its own proof point. In its June 4 earnings release, the networking company raised full-year fiscal 2026 revenue guidance to $6.3 billion, plus or minus $100 million. Its optical networking segment produced about $1.1 billion of fiscal second-quarter revenue, roughly 70% of the total. You don't need a complicated thesis there. The AI data-center buildout is pulling real revenue through the optical stack.
Corning is the more complicated name. Barron's reported last week that the stock fell 46% in July before rebounding after a Truist upgrade, with analyst Matthew Niknam pointing to customer spending in Corning's optical segment, which accounts for about 45% of sales. A stock can be part of the AI infrastructure trade and still punish late buyers. Frankly, that is the warning label on the whole group.
The ETF Machine Has Arrived #
Wall Street doesn't wait long before packaging a trend. Tema launched the Photonics & Optical ETF, ticker LAZR, on June 30 with a 0.75% expense ratio and a research partnership with SemiAnalysis. As of late July, Tema listed Lumentum as its largest public holding and also included private-market exposure to Anthropic. It is an unusual mix: lasers, optical components, a private AI lab - all inside the same wrapper.
KraneShares followed with the Photonic and Optical ETF, ticker LUMA, on July 15. Its published holdings as of July 30 put Lumentum first, followed by Coherent, Soitec, MACOM, AXT, Aixtron, Tower Semiconductor and Marvell, among others. That list tells you what the market is really trying to buy. Not one clean company. A supply chain.
There is a geopolitical edge now too. Investopedia reported Friday that optical stocks jumped after a Reuters report said the Federal Communications Commission was preparing a rule that could restrict Chinese-made optical transceivers from U.S. data centers. Coherent rose 13%. Lumentum gained 6%. Corning added 5%. All that day, according to the same report. Policy risk has become part of the bull case for U.S. suppliers.
Here's the thing worth sitting with: this is the second narrow AI bottleneck trade in under a year. High-bandwidth memory went first. Optics came next. The market keeps finding the part of the AI buildout where demand is urgent, supply is tight and customers have little choice but to pay.
That can work beautifully. It can also reverse fast. If hyperscaler spending slows, or if customers double-order parts and then step back, the stocks that rose the fastest will have the most air underneath them. For now, though, the money has made its choice. It is betting on light.
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